It's no secret that many Sacramento listing agents prefer to receive offers from conventional buyers over FHA buyers. The reasons are many and sometimes unfounded: Listing agents and their sellers like to see large down payments. They believe a large down payment makes the buyer more attractive and solid. They know that credit score requirements for a conventional loan are higher than those for FHA, so they sometimes believe that FHA buyers have lower credit scores, even when they don't.
Listing agents also worry that FHA may impose repair demands that could cost their sellers more money, but FHA's requirements have been relaxed somewhat. FHA no longer makes sellers replace cracked windows, for example.
No matter how you look at it, though, FHA buyers often get the short end of the stick when it comes to offers. I've had buyer's agents call me to ask before they wrote an offer if my seller would even consider an FHA buyer.
Here's the good news. Although there's been a lot of confusion, frustration and anger over the well intentioned but poorly drafted HVCC -- Home Valuation Code of Conduct -- it doesn't apply to FHA loans.
Many Sacramento agents are discovering that conventional appraisals are coming in lower than market value. Moreover, review appraisals are often demanded through underwriting. Escrows are blowing up. Of course, in the case of a Sacramento short sale, the short sale banks will often reissue a short sale approval based on the appraised value, but those underwriting demands delay closing.
A Sacramento buyer of a bank-owned home also received a low appraisal this week. The appraiser based the appraisal solely on foreclosed home prices and refused to consider the regular sales. Good thing the subject property was a foreclosure. The buyer's lender suggested at first that we contest the appraisal, and I don't understand that kind of thinking. Why? I represent the buyer. We have asked the bank to lower the sales price.
But in other escrows where I represent the seller, you can bet those FHA buyers are looking more attractive all the time. At least with an FHA buyer, the buyer's lender is free to choose a reputable, experienced and knowledgeable appraiser -- an appraiser who intimately knows the neighborhood, has appraised and been inside other homes in those neighborhoods -- so we are more likely to receive a reasonable and valid appraisal. You can order 5 appraisals from 5 different appraisers, and they can all deliver a different appraised price. It's just an opinion of value. An estimated opinion of value.
Photo: Big Stock Photo
Elizabeth Weintraub is an author, columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout Sacramento. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you.
The Short Sale Savior, by Elizabeth Weintraub, available in bookstores everywhere and at Amazon.com.
Sacramento Short Sale Agent, Elizabeth Weintraub, has the answers to your Sacramento short sale questions.
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Certified HAFA Specialist
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Elizabeth Weintraub is an author, home buying columnist for The New York Times-owned About.com, a Land Park resident, and a Land Park real estate agent who specializes in older, classic homes in Land Park, Curtis Park, Midtown and East Sacramento. Weintraub is also a Sacramento Short Sale agent who lists and successfully sells short sales throughout the four-county Sacramento area. Call Elizabeth Weintraub at 916.233.6759. Put 35 years of real estate experience to work for you. Broker-Associate at Lyon Real Estate. DRE License # 00697006.
The Short Sale Savior, by Elizabeth Weintraub, available at Amazon.com.
Lyon Real Estate is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan.
Photo: Unless otherwise noted in this blog, the photo is copyrighted by Big Stock Photo and used with permission.
The views expressed herein are Weintraub's personal views and do not reflect the views of Lyon Real Estate.
Disclaimer: If this post contains a listing, information is deemed reliable as of the date it was written. After that date, the listing may be sold, listed by another brokerage, canceled, pending or taken temporarily off the market, and the price could change without notice. It could blow up, explode or vanish. To find out the present status of any listing, please go to elizabethweintraub.com.
Thanks for this post, Elizabeth. There has indeed been confusion and frustration over the poorly drafted HVCC -- Home Valuation Code of Conduct. Didn't see what you say that "it doesn't apply to FHA loans" and will be checking that out.
My article ~ New HVCC for Appraisals ~ Is US Government Passing The Blame?
Elizabeth - AMEN GIRLFRIEND! It's about time. I haven't seen this happening just yet down here in Ventura and LA counties but I suspect that it's just a matter of time. It will probably take a few blown conventional deals before listing agents start to realize that those FHA buyers are probably going to be a much better deal for them and their sellers.
Hi Harrison: Yes, it is true; the HVCC does NOT apply to FHA loans. Here is an explanation of the HVCC from Freddie Mac.
Hi Donne: I suspect you're right. Sometimes people don't think ahead. But they'll soon find out. Every single conventional buyer I'm working with at the moment has appraisal issues. Agents in my office report many of their conventional pending sales are collapsing. We're just seeing the beginning of the fallout from HVCC. I predict it will get much worse.
Go FHA buyers! Yeah!
It's unfortunate that you can't get a FHA loan on a second home, which is mostly what I sell. Because the new HVCC is really hurting me. I have a seller paying for an appraisal (2nd one) at the moment to try to resolve an issue.
You taught me some things about the appraisals for FHA. It just seems strange to me that FHA makes loans as high as they do now. When I started their maximum was very low. Good blog as usual.
We are currently into a review of the conventional appraisal that came i fine for value and now the underwriter in the final review asked for different comparables to justify the value.
Oh, this HVCC is going to hurt everybody far more than anybody can most likely predict at this point. What started out as a way to help consumers has ended up actually hurting and crushing them. More and more conventional loans will be in jeopardy and buyers will lose more and more homes until some politician steps in or a lobbyist finds a way to get our voices heard. No appraiser should be allowed to appraise a home that the appraiser has never seen. Sometimes we get appraisers in Las Vegas or Stockton appraising homes in Sacramento for conventional lenders. The situation is way out of hand. And it will only get worse.
Elizabeth - I've been amazed at how some FHA appraisers and underwriters have appeared to have blindfolds on when processing new mortgages on bank owned property lately. They have developed blind eyes:-) But, I agree with you 100% that buyers with the larger down, and who will go conventional have the advantage for the reasons you state.
By the way, your book, "The Short-Sale Savior" arrived at my door today via Amazon. You can autograph it for me the next time we have lunch:-)
That is just exactly what many sellers don't want to hear..that short sales and foreclosure have/will influence their sale price/appraisal..."That isn't MY house...."...oh yeah, it is now....Blog on Lady..enjoy the sunshine !